Pernod results outstrip estimates

A week after Diageo’s strong results for the year to the end of June, arch rival Pernod Ricard published its own bullish set of figures for the same period, which also outstripped estimates.

Profits from recurring operations were up by 6% (or 8% when measured organically), organic sales growth was 7% ahead, gross margins exceeded 60% and there was a significant reduction in net debt. The dividend is being increased by 7.5%. Chief executive Pierre Pringuet said the “excellent results” were a reflection of “how dynamic our business has been”.

In combination, Pernod Ricard’s Top 14 brands achieved record sales volumes while seven of them achieved their best-ever volume performances. While growth in Europe remained sluggish, all regions recorded improved results. Most notable was Asia/Rest of the World where the group achieved organic growth of 15%.

Pringuet was keen to underline that Pernod Ricard had established itself as the “volume leader” in China. In addition, India is now the group’s fifth largest market, where Pernod Ricard’s whisky sales grew by 30% in the year. Overall, Asia now contributes 20% of the group’s profit from recurring operations, while emerging markets overall generate 36% of sales and 37% of profit from recurring operations with sales in Africa and the Middle East 24% up in the year.

Pringuet said that in North America premiumisation was “back on track” and that the market since June was showing signs of accelerated growth. Indeed, the group has pushed through some price increases there since August to take advantage of the growing trend.

Five of the 14 focus brands achieved double-digit organic sales growth during the year – Royal Salute +27%, Martell +22%, Jameson +20%, Perrier-Jouët +17% and The Glenlivet 14%. Only Kahlua showed a fall, but Pringuet said he was confident that the brand’s problems were being addressed.

Looking forward, Pringuet said that performance since the end of the financial year “confirms the resilience of our markets. We will continue to grow,” he said, “by capitalising on the strength of our portfolio brands, the quality of our distribution network and the powerful leverage of emerging markets.”

He did not offer any performance guidance for the present year but, as is the group’s practice, will wait to do so at the first quarter sales results which will be released in October. That did not please the markets, which marked the shares down by 1% despite the bullish trends.

However, Pringuet emphasised the intention to continue organic growth at the same time as cutting the group’s debt to earnings ratio to four by next summer. It has already fallen to 4.4 from 4.9 at this time last year.

When asked if that would continue to preclude takeover activity, Pringuet responded with Gallic ambiguity. He said Pernod Ricard would not make “tactical” moves in the next 12 months but he refused to exclude the possibility of “strategic” acquisitions if they became available. That would seem to leave the door open for possible participation in a joint attempt to dismember Beam Global after the US group achieves a separate Wall Street listing next month.